E-therapeutics Regulatory News (ETX)

e-Therapeutics plc

("e-Therapeutics" or the "Company")

Proposed acquisition of Searchbolt Limited to strengthen e-Therapeutics' intellectual property

Notice of General Meeting

11 May 2016: e-Therapeutics plc (AIM: ETX), the drug discovery company, has proposed the acquisition of Searchbolt Limited ("Searchbolt") (the "Acquisition"), for an initial consideration of up to £2.32m.

e-Therapeutics is focused on commercialising and validating its drug discovery platform. As part of the preparation for future commercialisation deals, the Directors believe it is essential to secure the ownership of all the Company's intellectual property by way of the acquisition of Searchbolt, a spin-off from e-Therapeutics at the time of the IPO in 2007. The acquisition will ensure that the value of any future commercialisation deals will be maximised for shareholders.

Overview

About Searchbolt

· Searchbolt is a developer of internet search engine technology that was demerged from e-Therapeutics at the time of flotation in 2007.

· At the time of the demerger, the Company granted Searchbolt an exclusive, perpetual royalty free licence of intellectual property to exploit the Company's core technology in relation to internet search engine technology.

· Searchbolt's principal assets now comprise the intellectual property licence granted to it by the Company in 2007 and assets Searchbolt has developed by itself since 2007 consisting of its technology developments and internet search engine software.

· As e-Therapeutics nears commercialisation of its drug discovery platform assets, the Directors believe that consolidating the ownership of its intellectual property is essential to secure shareholder value.

· This Acquisition will consolidate the Company's ownership of Searchbolt's technology to ensure that e-Therapeutics has full control of the rights to defend its intellectual property.

Details of the Acquisition

· Under the Offer, the aggregate consideration payable by the Company to the Sellers comprises:

o Initial Consideration of approximately £1.76m payable in cash;

o Retained consideration of approximately £563,000 payable in cash upon the receipt by Searchbolt of such sum from third parties in respect of debts owed by them to Searchbolt;

o Earn out consideration detailed later on in this announcement.

· The Searchbolt Shareholders may elect to receive some or all of their entitlement to the Initial Consideration and approximately £421,280 of the retained consideration by the allotment and issue of Consideration Shares at a price of 14.55 pence per Consideration Share.

· Malcolm Young and Sean Nicolson are both shareholders of Searchbolt and Malcolm Young is also a director of Searchbolt. Accordingly, they are both considered "related parties" of the Company as defined in the AIM Rules.

· Both Malcolm Young and Sean Nicolson have elected to take their full share alternative entitlement in shares subject to a cash element being taken to cover the capital gains tax payable. The initial and retained consideration payable to them is set out later in this announcement.

· The Acquisition is subject to and conditional upon the approval of e-Therapeutics' Shareholders under section 190 of the Companies Act and the passing of the other Resolutions because it is a substantial property transaction involving a Director.

· The General Meeting to approve the Acquisition is being held at 12.00 noon on 27 May 2016. The Company has secured irrevocable undertakings to accept the Offer from the holders of more than 80% of the Searchbolt Shares in issue and to be issued in connection with the Acquisition.

Iain Ross, Chairman of e-Therapeutics, commented:

"Our drug discovery platform continues to exceed our expectations by generating many high quality, potent compounds. We are focused on demonstrating the value of our approach. As we head towards the commercialisation of our assets it is essential to have complete control of all the intellectual property that protects our core processes.

"This acquisition reunifies e-Therapeutics with full control over our patent estate and we believe that the value of protecting our technology will become increasingly apparent."

All capitalised terms used in this announcement and not otherwise defined have the meanings given at the end of this announcement and in the Circular and Notice of General Meeting.

-Ends-

For more information, please contact:

e-Therapeutics plc

Iain Ross, Chairman

Steve Medlicott, Finance Director

Tel: +44 (0)1993 883 125

www.etherapeutics.co.uk

Numis Securities Limited

Michael Meade / Freddie Barnfield (Corporate Finance)

James Black (Corporate Broking)

Tel: +44 (0) 207 260 1000

www.numis.com

Instinctif Partners

Melanie Toyne-Sewell / Jayne Crook / Emma Barlow

Tel: +44 (0) 207 457 2020

Email: e-therapeutics@instinctif.com

About e-Therapeutics plc

e-Therapeutics (AIM: ETX) is a drug discovery company with a proprietary discovery platform based on advances in network pharmacology and chemical biology.

The Company is applying its platform to the discovery of new drug candidates. The therapeutic focus of the Company's activity is in immuno-oncology, addressing drug resistance in targeted cancer therapies and anti-infectives. The platform is highly productive, yielding multiple potent and selective molecules at a much higher rate and more quickly than is reported for conventional drug discovery.

e-Therapeutics has a variety of preclinical stage assets, including ETX1153c, a functionally resistance-less antibiotic; ETS2300, telomerase inhibition in anti-cancer; ETS3100, small molecule anti-TNFα; ETS2400, Hedgehog pathway inhibition and ETS5200, broad spectrum antivirals. The Company has recently completed a phase IIb clinical trial for ETS6103, a drug to treat major depressive disorder.

The Company is fully funded to advance its drug discovery programmes. It is based in Oxford and Newcastle, UK. For more information visit www.etherapeutics.co.uk.

Proposed Acquisition of Searchbolt and Notice of General Meeting

Introduction

The Acquisition, which is being effected by way of the Offer, is conditional among other things on the passing of the Resolutions at the General Meeting. The Resolutions include the approval by the Company's shareholders of the Acquisition for the purposes of section 190 of the Companies Act. The Approval is required as two of the Directors, Malcolm Young and Sean Nicolson, hold shares in Searchbolt and consequently the Acquisition constitutes a substantial property transaction for the purpose of section 190 of the Companies Act.

Background to and reasons for the Acquisition

Searchbolt was demerged from the Company at the time of the Company's flotation in 2007. Searchbolt was established to develop internet search engine technology. At the time of the demerger, the Company granted Searchbolt an exclusive, perpetual royalty free licence of intellectual property to exploit the Company's core technology in relation to internet search engines. Under the terms of that licence, Searchbolt was granted the right to grant sub-licences and to assign the licence. The Company undertook not to grant a similar licence to other parties.

Searchbolt currently has no employees or material commercial agreements. Its principal assets comprise the benefit of the intellectual property licence granted to it by the Company in 2007, technology developed by Searchbolt itself since 2007 and internet search engine software developed by Searchbolt. For tax planning and practical reasons the Acquisition has been structured as an acquisition of Searchbolt rather than just Searchbolt's intellectual property assets.

The Independent Directors have reviewed the principal intellectual property assets held by Searchbolt. They consider that the acquisition of Searchbolt would enable the Company to:

· Consolidate its ownership of the technology that is currently licensed to Searchbolt, which would ensure that the Company has full control of the rights to defend its intellectual property. Although the Company may continue its current drug discovery and development operations without acquiring Searchbolt, the consolidation of ownership of its technology offers a variety of strategic and practical benefits;

· Potentially exploit its technology in the internet search and social media fields. The social media sector was nascent at the time of Searchbolt's establishment in 2007. Since that time, social media has developed into a significant business sector. The restriction of Searchbolt's licence of the Company's technology to internet search alone has limited Searchbolt's ability to develop complementary technologies in the social media field.

Details of the Acquisition

The terms of the Acquisition are set out in the Offer that has been made to the Sellers.

Under the Offer, the aggregate consideration payable by the Company to the Sellers comprises:

· Initial Consideration of approximately £1.76m payable in cash;

· Retained consideration of £563,000 payable in cash upon the receipt by Searchbolt of such sum from third parties in respect of debts owed by them to Searchbolt;

· The earn out consideration referred to below.

A Seller may elect to receive some or all of his entitlement to the Initial Consideration and up to approximately £421,280 of the retained consideration by the allotment and issue of Consideration Shares at the Issue Price. The Consideration Shares will rank pari passu with the existing Ordinary Shares in all respects including the right to receive all dividends or other distributions declared, made or paid by the Company by reference to record dates falling after their respective dates of allotment.

The earn out consideration will be calculated as follows:

· The entitlement to the earn out shall accrue in respect of:

o a sale of Searchbolt;

o the sale or licensing in the Field of the patents previously licensed by the Company to Searchbolt and/or patents owned outright by Searchbolt and/or the copyright in software owned outright by Searchbolt (a "Relevant Sale")

· No earn out shall be payable until the Company has recouped the following costs:

o £54,500;

o all reasonable costs incurred by the Company in relation to a Relevant Sale including: legal, accounting, tax and other professional fees; finder's and all other sale fees incurred in connection with a Relevant Sale; fees payable to third parties in relation to establishing the value of the patents and the copyright, the subject of the earn out entitlement and/or any possible infringements of the same by third parties;

o revenue or royalty shares payable to any third parties in connection with any sale or licence.

· Once such costs have been recouped, the aggregate earn out will be 25% of the net proceeds of a Relevant Sale. The aggregate earn out will be subject to a maximum payment of £100,000,000 plus 0.0000000001% of the excess of a Relevant Sale over £400,000,000 of those Net Sale Proceeds.

The earn out consideration shall be satisfied in the same form in which it is received by the Company (whether cash, non-sterling currency, shares, warrants, options or any other non-cash consideration).

Under the Offer, certain Searchbolt directors will give warranties and a tax covenant to the Company. The maximum liability of such directors under such warranties and the tax covenant will be £75,000. In addition to the warranties and the tax covenant to be given by certain Searchbolt directors, the Company has arranged, for its benefit, a warranty and indemnity insurance policy which, subject to its terms, will provide aggregate insurance cover of £2,500,000 in respect of claims arising under such warranties and tax covenant.

The Offer is conditional upon, amongst other things, the passing of the Resolutions.

The Company has secured irrevocable undertakings to accept the Offer from the holders of more than 80% of the Searchbolt Shares in issue and to be issued in connection with the Acquisition. Under Searchbolt's articles of association the acceptance of the Offer by such Sellers will enable the Company to compulsorily acquire all other Searchbolt Shares, so that it acquires the entire issued and to be issued share capital of Searchbolt. Completion of the Acquisition is expected to occur in late May 2016.

Undertakings of Malcolm Young and Sean Nicolson

Malcolm Young and Sean Nicolson have irrevocably undertaken to accept the Offer in respect of the Searchbolt Shares that they hold. The initial and retained consideration payable to them is set out below. In addition, Malcolm Young and Sean Nicolson have undertaken to elect to receive Consideration Shares in respect of that part of consideration payable to them as set out below.

Related party transaction and substantial property transaction

Malcolm Young and Sean Nicolson are "related parties" of the Company as defined in the AIM Rules by virtue of being Directors of the Company. Malcolm Young is also a "related party" of the Company as defined in the AIM Rules by virtue of being a director of Searchbolt. Accordingly, the Acquisition is treated as a "related party transaction" under the AIM Rules.

The Independent Directors who are not related parties under the AIM Rules for the purposes of the Acquisition, having consulted with Numis, the Company's nominated adviser for the purpose of the AIM Rules, consider that the Acquisition is fair and reasonable insofar as the shareholders of the Company are concerned.

Malcolm Young and Sean Nicolson have not taken part in the Board's consideration of the Acquisition.

The Acquisition is defined as a substantial property transaction involving a director of the Company for the purpose of section 190 of the Companies Act. Accordingly, the Acquisition is subject to and conditional upon the approval of the Shareholders under section 190 of the Companies Act and the passing of the other Resolutions.

General Meeting

The General Meeting to approve the Acquisition is being held at the offices of Bond Dickinson LLP, 4 More London Riverside, London SE1 2AU at 12.00 noon on 27 May 2016. The Resolutions to be proposed at the General Meeting are as follows.

Resolution 1 approves the Acquisition as a substantial property transaction for the purposes of section 190 of the Act.

Resolution 2 seeks Shareholder approval for the directors to be authorised to allot shares. Under the provisions of section 551 of the Act, the directors are not permitted to allot shares unless authorised to do so by the shareholders. At the annual general meeting of the Company held on 11 June 2015, the directors were given authority to allot ordinary shares in the capital of the Company up to approximately 70% of the Company's then issued ordinary share capital. The Directors consider it appropriate that they be granted authority to allot shares in the capital of the Company up to a maximum nominal amount of £200,078.01 representing 70% of the Company's issued ordinary share capital following completion of the Acquisition assuming that the Sellers elect to receive the maximum number of Consideration Shares. This power will last until the conclusion of the next annual general meeting. The Directors have no present intention of exercising this authority other than in connection with the Acquisition.

Resolution 3 supplements the directors' authority to allot shares in the Company proposed by resolution 2. Section 561 of the Act requires a company proposing to allot equity securities (which includes selling shares held in treasury) to offer them first to existing shareholders in proportion to their existing shareholdings. Equity securities include ordinary shares (the only class of share capital the Company has at present), but do not include shares issued under employee share schemes. If resolution 3 is passed (which replaces the equivalent authority given at the annual general meeting on 11 June 2015), the requirement imposed by section 561 of the Act will not apply to allotments by the directors in the specific cases referred to in the resolution including:

· In connection with a rights (or similar) issue;

· Allotments of shares for cash up to a total nominal value of £55,884.69 (representing approximately 20% of the Company's issued share capital assuming that the Sellers elect to receive the maximum number of Consideration Shares). This would retain the Directors existing flexibility to take advantage of business opportunities as they arise.

This authority will expire at the conclusion of the next annual general meeting or, if earlier, 15 months after the date of the resolution, except insofar as commitments to allot shares have been entered into before that date.

DEFINITIONS